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2016 (7) TMI 877

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..... n abandoned on ground of unavailability of appropriate tract of land and steep rise in land prices, clearly shows that the public announcements were made without ascertaining the availability of suitable land at suitable prices. Moreover, decision to abandon the project relating to acquisition of land under joint venture was taken belatedly and even BSE was intimated about the abandonment of the proposal for acquisition of 200 acres of land much after the issuance of show cause notice by SEBI. In these circumstances, the decision of the WTM of SEBI that the public announcements relating to acquisition of 200 acres of land for development under joint venture was not made with bonafide intentions cannot be faulted. Even the public announcements relating to amalgamation of companies cannot be said to be bonafide announcements because, after making such public announcements no further steps were taken in that behalf. Argument of the appellants that they were waiting for the right time to act on the proposal is unacceptable because, in the ordinary course, decision to amalgamate companies is taken only if the circumstances as on that date demand amalgamation of companies. In the pres .....

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..... , 1992 (SEBI Act) and section 12A of the Securities Contracts (Regulation) Act, 1956 read with Regulation 11 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ( PFUTP Regulations for short). Since both these two appeals arise from a common order, both these appeals are heard together and disposed of by this common decision. 2. At the outset, it is relevant to note that the appellants have already undergone the punishment in as much as the appellants have not accessed the securities market for two years as stipulated in the impugned order and as such the appeals have become infructuous. However, it is submitted by counsel for the appellants that the appeals be heard and decided on merits, because, according to the appellants, the impugned order is patently erroneous and is contrary to law. Accordingly, both the appeals are heard and decided on merits. 3. Sumeet Industries Ltd ( SIL for short) appellant in Appeal no.224 of 2014 is a company engaged in the manufacture, sale and export of textile goods. Appellants in Appeal no.226 of 2014 were the directors of SIL at the relevant time .....

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..... 28.2.2008 withdrew its application for inprinciple approval from BSE. ii) On January 24, 2007, SIL announced that Board meeting will be held on February 13, 2007 inter alia to consider acquisition of further 200 acres of land near its 55 acre land bank at Kandla Port, District Bhuj, Gujarat for development under joint venture with a renowned infrastructure company for industrial park and power generation plant. On February 5, 2007 it was announced that the Board has approved further acquisition of 200 acres of land in the adjoining area and has also approved joint venture with a leading development and infrastructure company, namely, Vishwas Infrastructure Ltd. (formerly known as Mefcom Agro Industries Ltd.) for development of the lands to be acquired, into industrial park, power generation plant for captive consumption, road and telecom infrastructure, building interiors etc. This public announcement was also not implemented by SIL and much after the issuance of show cause notice, SIL informed the stock exchange on 30.4.2013 about the withdrawal of above joint venture proposal. iii) On January 24, 2007, SIL announced that Board meeting will be held on February 13, 2007 to c .....

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..... rder, appellants have filed the appeals in question. 5. Basic question to be considered in these two appeals is, whether, the WTM of SEBI is justified in holding that some of the unimplemented corporate announcements were made by SIL with the fraudulent intention of influencing the price of SIL scrip and thereby enable the promoter group entities to off load the shares of SIL at the inflated prices and make unlawful gains. 6. Counsel for appellants submitted that all public announcements were made by SIL with bonafide intention of implementing the said announcements and merely because, some of the announcements could not be implemented due to bonafide reasons, the WTM of SEBI ought not to have inferred that the said announcements were made with a fraudulent intention of inflating the price of SIL scrip and thereby enable the promoter group entities to offload the shares of SIL at inflated prices and make unlawful gains. 7. Counsel for the appellants submitted that the reasons for making the three public announcements and the reasons for not implementing the said three public announcements were as follows:- a) With reference to public announcement relating to preferentia .....

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..... 11 shares (around 95%) under the rights issue and thereby infused around ₹ 28,13,19,165/- in to SIL. In these circumstances it is submitted that decision to raise funds through preferential allotment was a bonafide decision and since that decision could not be implemented due to circumstances set out hereinabove, decision to raise funds through preferential allotment was abandoned and funds were raised through the right issue. Thus, it is submitted that since the object of raising funds has been achieved inspite of the delay, the WTM of SEBI was not justified in drawing adverse inference against the appellants. g) With reference to the public announcement relating to acquisition of 200 acres of land, it is submitted that neither in the public announcement dated 24.1.2007 nor in the public announcement dated 5.2.2007 it was stated that SIL has already acquired 200 acres of land. What was stated in the public announcements was that SIL was in the process of acquiring 200 acres of land for development under a joint venture with Vishwas Infrastructure Ltd. Such an announcement could not be said to have influenced the price of SIL scrip. h) Admittedly, SIL had furnished docu .....

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..... tment were made with bonafide intentions, then, application seeking in-principle approval would have been made after complying with all requisite conditions. Very fact that BSE has repeatedly found that SIL made applications without complying with requisite conditions clearly show that SIL was not sincere in making the application. Initial application made by SIL was rejected by BSE on ground that notice to the shareholders of SIL as required under the SEBI (DIP) Guidelines has not been issued and hence the Auditor s certificate was also defective. Subsequent application made by appellant was rejected by BSE on ground that the provisions contained in the Takeover Regulations have not been complied with. 11. It is impossible to believe that it is only on receiving letter from BSE, the appellants realised that preferential allotment of shares would trigger provisions contained in the Takeover Regulations, 1997 and that the appellants were bound to comply with the provisions contained under the Takeover Regulations, 1997. Assuming that the appellants came to know about their obligation under the Takeover Regulations, 1997 only on receiving letter from BSE, very fact that the appell .....

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..... ated to notices of stamp duty and corresponding sale deeds with regard to some agricultural land, to which neither SIL nor Vishwas Infrastructure Ltd. were parties. Apart from the above, very fact that proposal to acquire 200 acres of land has been abandoned on ground of unavailability of appropriate tract of land and steep rise in land prices, clearly shows that the public announcements were made without ascertaining the availability of suitable land at suitable prices. Moreover, decision to abandon the project relating to acquisition of land under joint venture was taken belatedly and even BSE was intimated about the abandonment of the proposal for acquisition of 200 acres of land much after the issuance of show cause notice by SEBI. In these circumstances, the decision of the WTM of SEBI that the public announcements relating to acquisition of 200 acres of land for development under joint venture was not made with bonafide intentions cannot be faulted. 13. Even the public announcements relating to amalgamation of companies cannot be said to be bonafide announcements because, after making such public announcements no further steps were taken in that behalf. Argument of the app .....

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